O’Malley, business at standstill in Maryland unemployment insurance debate

Maryland businesses have left Gov. Martin O’Malley with two options: accept the stinging loss of one of his top legislative priorities, or make a bold power play to essentially tell business groups, “Thanks for playing.”

That’s because business groups made a gutsy political move of their own Feb. 17 by rejecting O’Malley’s proposals to overhaul the state’s unemployment insurance system and lower their taxes. Business has securely held the upper hand in negotiations over the bill.

The unwavering business opposition is poised to derail efforts by O’Malley and the General Assembly to offer them relief. That would leave them without valuable campaign fodder as they prepare to run for re-election, unless they choose to pass the bill regardless of business opposition or to craft a new plan in the legislative session’s remaining seven weeks.

“Clearly the governor wanted to address the issue that businesspeople were appalled by the increase in their unemployment insurance premiums,” said Maryland Chamber of Commerce CEO Kathleen T. Snyder, referring to a hike that hits businesses starting this year but would be softened in O’Malley’s bill. “While we understand that, we didn’t ask for these bills.”

That position has frustrated lawmakers who have worked to build consensus on the issue and plan to continue pushing for a resolution, potentially with or without the business community’s support.

“I was quite shocked to hear they weren’t in support of the whole thing; I’m confused with it,” Sen. Thomas “Mac” Middleton, D-Charles, said Feb. 18. “Are they really, truly representing the average business person out there that’s struggling?”

O’Malley trumpeted the plans to businesses in the fall, like a white knight bringing $127 million to the unemployment insurance system to hand out to jobless workers and lower business taxes.

That’s how much stimulus money the state qualifies for if it passes what is known as unemployment insurance modernization, which includes making more people eligible for unemployment benefits at a level of an extra $20 million in payouts every year.

He would have used $83 million of that to lower most businesses’ unemployment taxes from $187 per employee to $153 per employee in 2010. Most paid $51 per employee in 2009. That proposed tax cut has been the impetus for the flurry of negotiations on the bill, because tax bills go out to employers March 1.

Searching for common ground

O’Malley spokesman Shaun Adamec declined to comment on the issue until a compromise had been reached. But as recently as a few weeks ago, O’Malley seemed not to expect much of a fight from businesses.

“I welcome a better idea,” he said in a Jan. 29 interview with the Baltimore Business Journal, in response to criticism from business groups. “I don’t know that it’s widely rejected. Hopefully we’ll find some common ground, because I don’t think their members want to leave it the way it is.”

A group including representatives from the Maryland Chamber, Maryland Retailers Association, AFL-CIO, General Assembly and state labor department has been batting back and forth proposals with O’Malley’s administration since the fall. But that rapport was stonewalled Feb. 17 when the chamber and retailers affirmed their opposition to the bill despite last-ditch offers of concessions from the governor’s office.

The business groups were concerned that the tax cut and expansion of benefits would be too costly to the fund that pays unemployment benefits, which has receded from nearly $1 billion 18 months ago to $32 million as of Feb. 12. Business taxes are what replenishes the fund. O’Malley’s office suggested ways to offset the added costs, but business leaders doubted they would generate enough savings to make a difference.

“If there’s no business support, does the governor just continue to move forward? I don’t know,” retailers association President Tom Saquella said Feb. 17. “I’m sure they’re probably wrestling with that decision right now.”

Some involved in the conversations were disappointed business groups were unable to accept those offers. Work force and labor representatives had found agreement on the governor’s proposals.

“Unfortunately, politics are involved in the opposition to the governor’s bill,” said Jason Perkins-Cohen, executive director of the Job Opportunities Task Force, a state work force agency. “The governor has bent over backwards; he has tried to listen to their concerns.”

‘Where they want to go from here’

Whether O’Malley will take those concerns into account going forward isn’t clear.

“I suspect this is not the end of the issue,” said Ellen Valentino, Maryland director for the National Federation of Independent Business, which also opposes the governor’s bill. “The governor has more to take under consideration than what the business community thinks. The lawmakers now have to take a look at the issues and decide where they want to go from here.”

That could include creative ways of providing business relief. Middleton has taken to brainstorming alternatives including using some or all of $20 million O’Malley set aside for a job creation tax credit for small business lending and credit.

Middleton, chair of the Senate Finance Committee, has been coordinating much of the negotiations between the various stakeholders to little avail. The House of Delegates also must still weigh in on the bill. House leaders started meeting with O’Malley aides to begin the process Feb. 17.

Many businesses are still hopeful some good will come out. Despite the gridlock, two proposals do appear to have universal support — one that would allow businesses to spread their unemployment tax bills over the year and another that would lower the interest penalty on late tax payments from 1.5 percent to 0.5 percent.

Debbie Gosselin, president of Watermark Tours, Charters and Cruises in Annapolis, said the expected unemployment tax increase is worth three part-time workers. Her business hires 170 part-time workers in the summer, and in the past some have filed for unemployment come fall. So any relief on unemployment taxes is vital, she said.

“I’m concerned about any increase in expenses, because we cannot pass them on to our customers at this point,” Gosselin said.